What consequences?
So far, the political situation has not affected economic growth. It must be said that the lack of a budget in 2019 and for at least part of 2020 avoids any saving measures. However, the situation is increasingly problematic:
– According to the European Commission, the Belgian budget will have in 2020 the largest public deficit in terms of GDP of the eurozone countries after Italy. This also means that once a government is formed, it will have to take drastic measures to correct the budget trajectory, which is likely to affect economic growth more severely.
– The structural reforms of the Belgian economy are at a standstill, which will limit the potential growth of the economy in the medium term. The time lost in this respect will not be made up.
– The absence of a government, and therefore of any decision, is fuelling all kinds of demands: on climate change, on pensions, on justice, etc. This creates political tensions. In addition to the risk of groups getting out of control (as was the case in France with the ‘Yellow Jackets’ movement), there is a risk of many disappointments, precisely because the next government will have to deal with its deficit problem.
In conclusion, the examples of Spain, Italy or even Germany show us that in the current period, where extreme parties are gaining power and the electorate is increasingly dispersed, forming a government is more difficult than in the past, and can therefore be a long-lasting process. In this context, the Belgian political situation is therefore not yet dramatic, especially since Belgium is used to long periods of negotiations (541 days in 2010-2011). Nevertheless, rarely has the situation appeared so tense between the political parties. This is probably due to the fact that the electorate votes in an increasingly divergent way in the North and South of the country.
At this stage, we consider that the scenario of new elections would be the most risky, as the outcome of these could prove even more complicated. But this is not our basic scenario either. A broad coalition might emerge from the current negotiations, even if this might take (a lot) more time.
